Here's my presentation I gave at Ohio InfoSec Forum today about the "Ejectable Core Backtrack Machine" and how filesystem segregation and encryption can help keep your data out of the wrong hands.
To get the full experience, open up the speaker notes to read along with what I'll be saying. It won't replace actually being there, but hopefully it'll help you grasp the concepts.
Future considerations (from InfoSec):
tmpfs instead of /tmp Find a way to disable direct memory access on the kernel level (firewire and PCI can exploit this)